Paul Wallbank | Paul Wallbank - Communications Professional

Tightening the screws

Cloud computing changes business IT economics, but it isn’t a magic pill.

Google had a big boost this week with Spanish bank BBVA announcing its 110,000 staff will switch to use the cloud based productivity software.

This wouldn’t be good news for Microsoft as their struggle to retain their almost monopoly position in corporate desktop applications and will undoubtedly mean reducing licensing fees and accepting tighter margins on their products.

BBVA’s move is interesting on a number of fronts although there’s a few myths among the trend towards cloud computing services and office productivity.

Cost saving myth

Part of the focus of selling these products is on cost and the head of Google Enterprise apps in Europe, Sebastien Marotte, said that his corporate customers on average achieved cost savings of between 50% and 70%.

The cost aspect is interesting, I’ve posted before about exaggerated claims for cloud computing savings, and Marotte’s statement deserves a closer look.

It’s highly likely the claimed cost savings are based on licensing – the standard Google Apps cost of $50 per user per year is substantially less than even the discounted rates large corporations receive on Microsoft licenses.

While the licensing cost is a serious line item, particularly when you have 110,000 employees, it isn’t the whole story; there’s training, maintenance, disaster recovery, security and a whole range of other issues.

Cloud computing services address a lot of those costs, but nothing like the order of 50 to 70%. In fact, it would be hard to find an enterprise that had the sort of slack in its IT operations to achieve those sort of savings.

In one respect, this is where its disappointing that cloud computing vendors tout those sort of savings – not only does it commoditise their industry but it perpetuates the myth amongst executives that IT staff spend the bulk of their time playing video games.

While there are real savings to be made for businesses switching to cloud computing, any sales person claiming a 50% or greater saving should be asked to justify their claims or shown the door.

Clean slate

Another interesting point with BBVA switching to Google is how the bank wants employees to leave all their old email and data in their old systems. Carmen Herranz, BBVA’s director of innovation, says we “want to start from scratch… don’t want to carry across old behaviours”.

Not migrating data is an interesting move and how BBVA’s users deal with retrieving their contact lists, dealing with existing email conversations and how staff will deal with feature differences like document revision tracking – an area where Microsoft Office outdoes Google Docs.

Internal use only

BBVA are only applying the Google services to internal documents as well which means the bank will be using other software – probably Microsoft Office – for corresponding externally.

This makes it even more unlikely the touted cost savings of 50 to 70% are achievable, and may actually increase support costs while reducing productivity as many customer facing staff will have to deal with two systems.

Having one system for use inside the business and another for external communications seems to be a European trend – before Christmas French company Atos announced it was abolishing email within the company but still using it for outside messages.

Both abolishing email and moving to cloud based office packages are really about improving productivity in a business while cost savings are nice, the main focus on adopting cloud computing – or any other new technology – should be on freeing your staff to do more productive work.

Blinking

Sometimes a business has to change, despite customer opposition

A while back I wrote about leaving customers behind. As a business grows or evolves some customers are left behind.

That’s not to say those customers are wrong or bad, just that they are not the right fit for the long term objectives of your business.

Sometimes those customers are raving fans and passionate patrons are important; if you can meet your clients’ business and emotional needs then you, and your customer, are in a great place.

But not always, sometimes those fans are a boat anchor to your business.

In 1998 Steve Jobs announced he was ditching the Apple Desktop Bus (ADB) standard for Mac computers and moving to the USB standard for new computers. Thousands of outraged Mac fans swore they would never buy an Apple computer again.

Henry Ford is quoted as saying if he’d asked 1890s what they wanted, he’d have built a better horse cart rather than a motor car.

Sometimes customers don’t know what they want and sometimes those who do know what they want aren’t the customers you want.

If you have to make that decision, it has to be firm – blinking in the face of opposition doesn’t work. You’ve shown you’ve blinked on one thing and you’ll be blinking on more. You’re now owned by your customers and the most conservative, risk adverse ones at that.

Once you’ve given ownership of your business to your most conservative customers, you’ll have to fight to regain control.

It’s much better to make a calculated, informed decision and go for it – if you’re right, your business is going to be stronger without those risk adverse and often low margin customers.

A lot of people decided they wouldn’t buy Steve Jobs’ or Henry Ford’s products again. Eventually they did.

Too good to be true

The same old scams catch us all

As regular as the Olympic Games are, so too are the ticket scams. Every four years we see a ‘scandal’ of vendors, these days online, offering cheap or difficult to get tickets. This year’s London Olympics are no different.

The bait used by these scammers is the almost impossible to get tickets, the frenzy to get along to the opening ceremony or top days sucks dozens, sometimes hundreds, of enthusiastic punters into losing money.

It’s not just Olympic tickets, with the ease of setting up websites scammers can be online quickly with a credible, professional looking site and new services, like group buying and ‘penny auctions’ also offer great opportunities for the enthusiastic spammer.

While it’s sometimes difficult to spot the scams, there are some signs that can reduce the risk of your being caught out.

Check the site

How long has the domain been registered? You can quickly check the details by running a whois search, a kind of online registration check.

For .com sites, the authoritative Whois site is Network Solutions while for .co.uk sites (a likely candidate for London Olympic ticketing sites) it is Nominet. Each country has its own registration list and in Australia, for .com.au it is AuDA who run the My Web Name site.

A recently registered, or long standing, name doesn’t in itself indicate whether a site is a scam or not, but it is a good start.

What are the contact details?

A reputable site that wants your money should have a phone number and street address. A site that doesn’t have these is a warning sign.

Do a web search

The web is your friend. Use your favourite search engine to search the business’ name, for most people this is Google. This can show if there’s been complaints about the site.

Make sure you do a full name search, for instance if you are searching for Joe’s cutprice tickets put the name inside inverted commas such as “Joe’s cutprice tickets”.

Also do a search on the business address, if a company operates from the same location as dozens of others then it’s almost certainly operating from a service office.

While there’s nothing wrong with a business operating from a serviced office, if a company is claiming to be a large reputable multinational then it’s probably telling porkies.

Use a disposable password

If the site asks you to create an account or a password, use something different to your regular banking or other important passwords.

Some of these scammers are actually harvesting login details for online scams so don’t use the same password as your email or social media account as you may find your account hijacked.

Don’t use social media logins

Account hijacking is becoming prevalent on social media sites. The scammers get access to a victim’s Facebook or Twitter account and then contact all the victim’s friends posing as the victim. This is particularly effective for getting more people trapped in the scam.

Increasingly we’re seeing sites using social media logins, that is offering to use your Facebook account rather than a user name or password as a convenient way of signing up. These almost always give the site permission to post on your behalf and you should not do this unless you are totally confident in the site.

Pay by credit card

Even the best of us can get caught out by scammers, so paying by credit card means you have some protection from dodgy deals as you can dispute and reverse the transaction.

Note the words credit card, if you use a debit card many banks won’t give you the same consumer protections.

Avoid direct wire payments or online services like PayPal as you’ll probably do your cash or, at best, be bogged down in the dispute procedure.

Use common sense

The most important part of avoiding scams is common sense; if something is too good to be true then it almost certainly isn’t true.

An offer for hard to get Olympic tickets, fifty dollar iPads or a million dollars from a long lost cousin in Africa always come with a catch that leaves you out of pocket and possibly with your identity stolen.

Many of these scams aren’t new, they’ve just evolved to take advantage the online world.

During the golden era of the snake oil merchant in the 19th Century, the phrase there’s a sucker born every minute was coined. Don’t be that sucker.

The pay day

How does a local news agent exit their business?

Last Sunday Mark Fletcher celebrated his 10,000th post at the Australian Newsagency Blog. In seven years of posting that’s an impressive achievement for someone running both a retail store and a software company.

In his landmark post, Mark looked at the major issues he’s covered on his blog over the last few year and one stands out as the biggest – the payoff for newsagency owners when they sell their businesses.

The failure of many newsagents to manage their businesses for day to day profit. Too many newsagents expect their pay day when they sell and do not realise that their pay day is today, tomorrow and next week … and that this determines what they will receive when they sell.

For Australian newsagencies the news is bad; their established industry is struggling in the face of technological change and regulatory changes – both of which are other points Mark raises – but more importantly the buying and selling businesses in all sectors is undergoing a fundamental economic shift.

Lifestyle Businesses

The underlying idea is that these businesses are what Steve Blank calls “lifestyle businesses”; proprietors buy them to provide an income for their families.

For these “lifestyle businesses” to have a resale value another family is has to raise the funds to purchase the enterprise.

Therein lies the problem, most purchases of businesses are financed by bank loans secured against property.

Late baby boomers and Generation Xers – those born between 1955 and 1970 – are the obvious buyers of these businesses and they don’t have access to the same equity as their parents.

The situation is even worse for those generations following whose high education debts mean an even later entry into the property market and even less equity available should they want to buy these businesses.

For sellers, this means is buyers can’t pay the prices retiring business owners need as their nest egg to support them through twenty or thirty years of bowling or travelling in their later years.

This inter generational mismatch isn’t just restricted to Australian newsagents; it’s a problem around the Western world for business owners whose exit strategy involves selling the business as a going concern for a substantial amount.

Cash poor buyers

As we reach the end of the late 20th Century credit boom, the money isn’t there for people to pay the sort of sums required by existing local business owners to retire in comfort. Even if the banks were prepared to lend the sum required, the buyer’s underlying assets can’t secure the loans and, most importantly, the cashflows aren’t there.

In an Australian newsagent context much of the cashflow has changed because of deregulation and new competition but on the bigger scale changing consumption patterns at the end of the 20th Century debt binge coupled with aging populations and restricted credit are changing the economics of family owned, small local businesses.

For the current owners of these small businesses, it means the pay day has to be today as it won’t be there tomorrow.

The danger is how many will follow the example of the large corporations who find themselves in a similar situation and respond by excessively cutting costs or chronically under-investing which is what has crippled big store retailing across the US, Australia and the UK.

Mark’s constantly pointed out that Australian newsagents have to reinvent themselves, as he celebrates seven years of blogging and 10,000th blog post it’s probably worthwhile considering how many, like the rest of us, will be working in our businesses far longer than we originally expected.

The pros and cons of bootstrapping

Should a business fund itself from cashflow?

There are plenty of ways of raising money for a business; venture capital, bank loans, private equity and – by the far the most common – bootstrapping, where a company finances it’s growth through its own cashflow.

An article in Tech Crunch by Ashkan Karbasfrooshan looked at the reasons why bootstrapping doesn’t work, his views are understandable Ashkan given his own business has raised $1.5 million in venture capital (VC) funding over the past four years.

Outside the Silicon Valley bubble, it’s worthwhile considering the real benefits and disadvantages to bootstrapping your business. As with any business tool there’s real pros and cons with all financing methods.

Benefits

There are a number of benefits with bootstrapping, in that it forces the business’ management to focus on the product and customers while giving founders full control of the business.

Total control

A bootstrapping business has total control over its destiny – the business owners answer to no VC, bank or outside imposed board of directors.

Those outside investors may also have different business objectives to the founders. Often a venture capital or private equity investor has a three to five year time frame while a founder may be looking further.

Also a mis-match between the founders’ and investors’ exit strategies will almost certainly be a problem should the opportunity to sell the business arise.

One of the biggest risks for a smaller business is banks can call in loans or ask for additional security – something that crippled many smaller businesses during 2009.

For those who’ve raised equity funding, founders can find their shareholdings diluted or even be fired from the business they created.

Customer focus

The business that is focused on funding itself pays close attention to the needs of its customers. The distraction of raising, and then managing, investors or lenders can distract from building the business.

Validating the business model

A successful business that has grown through funding itself is has, by definition, a valid and profitable business model. This is not necessarily true of VC or debt funded enterprises.

Overcapitalisition

In his Tech Crunch article, Ashkan quotes Marc Andreessen and Jason Calacanis as saying “raise as much money as you can.”

This may well be conventional wisdom in Silicon Valley though the reality is a business can have too much money, as we saw in the original dot com boom with businesses such as Boo.com lavishing money on founders and expensive frills.

A business can be crippled by having too much investment money that distorts the founders’ objectives and allows the company to lose focus on helping customers and getting the product right.

Generally with bootstrapping this isn’t a problem unless the founders have an insanely profitable business, which renders the need for outside investors largely irrelevant.

Disadvantages

For all of bootstrapping’s advantages there are real downsides as well including the risk of being undercapitalised and the difficulty in attracting diverse management.

Undercapitalisation

One of the main reasons for business failures is under capitalisation; simply not enough money to grow the enterprise or to put it on a sustainable footing. This is a constant risk for bootstrapped businesses.

Inability to focus

Many owners or managers of bootstrapped businessese focused on making sales so they can pay the rent and make payroll; this distracts management from executing the longer term aims of the business.

Expertise

In taking an equity partner – either in private equity, venture capital or angel investor – the founders get the benefit of the investors’ expertise.

A good investor who has similar objectives to the founders can add real value and complement the original team’s strengths and weaknesses.

No one size fits all businesses

Overall there’s no black and white to bootstrapping versus borrowing money or finding an equity partner; all of them have their risks and benefits.

As entrepreneur Steve Blank points out, there are six types of startup and only two of them; the scalable and buyable (born to flip) are suited to the Silicon Valley venture capital model.

The real risk in business is assuming one way or another is the only way to fund an enterprise, for many it’s a combination of some or all of the methods to raise funds.

It’s quite possible to see a business first bootstrap to get established, then get a bank loan to finance growth, followed by a VC or seed investment that finally sells out to a private equity fund.

For many business owners though, funding the business out of cashflow is the most sustainable way to grow and profit. If you’re happy with what you’re doing, there’s no reason to be hassling for equity or begging at the bank.

The irrelevant operating system

No-one cares about operating systems anymore

Last decade, people queued around the block to buy the latest version of Windows, today no-one cares. What next for a market that has become commoditised?

When you visit a website your browser reports, among other things, what type of system you’re using. Net Applications – a US based web monitoring company who analyse online browsing statistics – keep a regularly updated list of what people are using when surfing the net.

On their latest statistics, Windows XP finally fell below 50% in September 2011, just on ten years after it was released. Windows 7 is taking over from XP while Apple steadily gain market share.

These statistics show how the operating system has become irrelevant, only really dedicated geeks really care anymore about their version of Windows or whether a computer is running an Apple Mac or Microsoft product.

As most computer users are drifting to cloud computing services and consumers are increasingly using their PCs to access online games and social media sites, it doesn’t really matter anymore what systems are used as long as they work.

For many in the computer industry, this is a problem as they desperately want to sell a product in a market that has become commoditised. It’s another example of the PC industry’s broken business model.

It’s not just the computer industry with this problem, the 3D TV hype of 2010 was a desperate attempt to sell new television sets in a market that had stalled; recession hit consumers had no desire to replace their perfectly good TVs that were less than a decade old, just like Windows XP users.

This year’s Consumer Electronics Show that launches in Las Vegas this week will see similar desperation as the various PC and mobile phone manufacturers trying to generate excitement about their new products.

For the journalists and PR folk at the CES the problem is customers largely don’t care anymore. As the failure of 3D TV illustrates, consumers aren’t buying the hype.

Just as with operating systems, most customers want something that works, if you’re going to get them to replace older proven technology you’ll have to show where the new product adds value.

The era of products flying off the shelves because they are new and shiny is over – just ask Microsoft about it’s operating systems.

The business of baffling choices

Why do computer and phone companies offer so many plans and models?

In his Daring Fireball blog, John Gruber’s takes to task the view that Apple suffers through not having a wide product range.

John makes the valid point that Samsung seems to stealing market share from HTC rather than Apple but the whole theory of offering too many choices strikes to the heart of two industry’s business models.

Those two industries are the mobile telco business and the Windows personal computer sector.

In the PC world, the wide range of models has been both an advantage and a weakness; it’s allowed Dell and others to create custom machines to meet customer needs but also leaves consumers – both corporate and home buyers – confused and suspicious they many have been taken advantage of.

All too often customer were being had; frequently buyers found they’d bought an underpowered system stuffed with software that either was irrelevant to their needs or an upgrade was necessary to get the features they hoped for.

The entire PC industry was guilty of this and Microsoft were the most obvious – the confusing range of operating systems and associated software like the dozen version of Microsoft Office was deliberately designed to confuse customers and increase revenue.

For the PC industry, the “baffle the customer” model reached its zenith, or nadir, with Windows Vista where Microsoft deliberately put out an underspecced ‘Home’ edition designed to push sales up the value chain.

Compounding the problem, most of the manufacturers followed Microsoft’s lead and put out horribly underpowered systems in the hope that customers would upgrade with more memory, better graphics card and bigger, faster hard drives.

Most customers didn’t upgrade and as a result the Vista operating system – which was horrible anyway – enhanced its well deserved reputation for poor performance.

In the telco sector, consumer confusion lies at the heart of their profitable business model; a bewildering range of phones and plans often leaves the customer spending too much, either through an overpriced plan or paying punative charges for ‘excess’ use.

Having a hundred different types of Android phone adds to the confusion and, by restricting updates, they can cajole customers into ‘upgrading’ to a new phone and another restrictive plan every year or so. This is why you get phone calls from your mobile phone company offering a new handset deal 18 months into a two year plan.

Apple’s model has been different; in their computer range there has never been a wide choice, just a few configurations that meet certain price points. The same model has used for their phones and iPads.

For Apple, this means a predictable business model and a loyal customer base. They don’t have to compete on price and they don’t have to fight resellers and telcos who want to ‘own’ the customer. It’s one of the reasons mobile phone companies desperately want an alternative to the iPhone.

Companies using the baffling choices business model – Microsoft, HP, Dell and your local mobile telco – may well continue to do okay, but that business model is coming under challenge as new entrants are finding new niches.

For all of us as consumers all we can do is make the choices that are simple are reject complexity. Warren Buffett has always maintained he doesn’t invest in businesses he doesn’t understand, perhaps we should have the same philosophy with the purchases we make.

Booking a disruption

The ticket agency business is undergoing disruption. Have the incumbents noticed?

Last night, US based booking service Eventbrite launched their Australian service, which promises to disrupt some cozy local incumbents.

The Australian ticket booking industry – like most of the nation’s business sectors – is dominated by two large players; Ticketmaster and Ticketek, with the latter dominating most ticket sales for big events.

Like most Australian duopolies, both Ticketmaster and Ticketek have a comfortable existence. With almost every ticket for major sporting, entertainment and cultural fixtures sold through their services, they’ve been allowed to neglect investing in new platforms while reaping monopoly profits from both attendees and organisers.

The development of online ticketing platforms like Eventbrite and Australian equivalents like Sticky Tickets are part of the disruption coming to this sector.

All of a sudden, event organisers don’t have to rely upon the grace and favours of major incumbents and ticket buyers aren’t getting slugged with outrageous “administrative fees” by the agencies.

The ticketing sector is one of these areas where decades of business practices have allowed middle men to develop, now a whole breed of new intermediaries are using technology to challenge the incumbents.

Integrating other technologies like reporting services, mailing lists and social media platforms along with hardware like iPad, iPhone and Android based management platforms for those on the door makes these services even more compelling to event organisers.

Right now the big incumbents probably aren’t taking these services too seriously as their cashflows, and management bonuses, seem safe and unassailable. Like all challenged industries, it might take them some time to figure out there is a real threat to their positions.

It will be interesting when a big events organiser or sports venue decides to move across to one of the newer ticketing companies, then we’ll see how the big incumbents deal with the threat to their businesses.

The four why’s of Sam Palmisano

Basic questions drive effective business strategies

The New York Times’ profile of IBM’s outgoing CEO, Sam Palmisano, is an interesting study of how an established business can make well thought out long term plans through asking some basic questions.

Under Palmisano, IBM moved a large part of their business from manufacturing and distributing computers to more Internet based products and services.

A key part in IBM’s reinvention was recognising the PC hardware business was in decline as commoditisation of the computers and associated components eroded margins.

To counter this, IBM looked at the areas where they believed the margins would be for the next decade and decided they lay in “on-demand” computing – what we now call “cloud computing”.

What is particularly notable with IBM’s move to the cloud is this renting time on mainframes was the mainstay of their business up until the 1990s so the culture of reliable, accessible services backed by well priced plans is something not unknown to IBM.

Having decided on the on-demand computing strategy, IBM then looked at who would buy their hardware division. Here they acted strategically and rather than selling to the highest bidder – someone like Dell or a private equity firm – they sold to China’s Lenovo which enhanced IBM’s standing within the Chinese markets.

The notable thing with all of these plans is that they were made strategically and executed without the dithering we see at other companies struggling with similar issues. Yahoo! and HP being the two standouts in this area.

While smaller businesses can’t execute on the same scale companies the size of IBM can should they choose, Sam Palmisano’s thinking was guided by four key questions;

“Why would someone spend their money with you — so what is unique about you?”
“Why would somebody work for you?”
“Why would society allow you to operate in their defined geography — their country?”
“Why would somebody invest their money with you?”

These four are something all of us could ask of ourselves and those around us. The answers to those questions are will guide what we do, where we do it and how we do it.

For IBM, the future is fascinating as a new CEO comes in and they apply their investments in cloud computing, consulting and data mining to bigger picture projects like the Smarter Planet initiative.

How this works for IBM and the other large technology companies remains to be seen although it’s quite clear that unlike many of their contemporaries, IBM’s management has a vision of where their business fits in the 21st Century.

The importance of transparency

The US Federal Reserve has announced they will release more details from the information they use on determining official interest rates. On the same day the social networking site Twitter is embarrassed when its opaque verified account policy fails.

Being open and honest is the key component in trust and in turn trust is the bedrock of society. If you can’t trust your neighbour, the local cop or the grocer at the shops then society quickly starts breaking down.

Many big businesses, particularly those in markets where they are one of a small group of incumbents get away with abusing your trust; they tell an illegal surcharge can’t be waived because “that’s their policy, you can’t change an account because of the “terms and conditions” and that the call centre’s operators name is Janet even though it’s Rajiv and you know that when you call back asking for “Janet” you’ll be told”there’s 35 Janets working in the department right now”.

All of this we’ve come to expect from big bureaucratic organisations like the phone company, the bank and the tax office. The interesting thing is how many new businesses that are adopting this anti-customer model of operating.

Rules and policies are fine – as long as everyone knows them, they aren’t too onerous and they are applied fairly and consistently.

The challenge for all businesses – particularly those taking on incumbents – is they have to show they are more trustworthy than the existing operators. If you can’t show that, then maybe it’s time to think about how you operate.

What Rupert did wrong

Listening is the most important thing a new Twitter user can do.

A small step in the evolution of social media happened over the new year when Rupert Murdoch joined Twitter and almost immediately, and predictably, his tweets attracted criticism.

While there’s still a nagging doubt as to whether the @rupertmurdoch account is real, despite the assurances of Twitter founder Jack Dorsey, there’s a few lessons other new users can draw from Rupert’s experience.

Shut up and listen

One of the unfortunate things about social media is how everybody assumes their voice has to be heard. It’s a mistake we all make when we first join theses services.

Like social contexts, it’s best to be quiet when you first join until you’ve figured out the protocols, manners and dynamics of the group.

Just stumbling in and blasting your opinions out doesn’t usually work well whether we’re at the pub, mothers’ group, updating Facebook or posting on Twitter. The key is to understand why you are there.

It’s about community

The first word in social media is “social”, these online services are a society and just restricting your circle to a select few isn’t go to give you a great deal of benefit.

Rupert Murdoch’s account is a good example of how many people restrict themselves; at the time of writing he’s following five users. If it really is Rupert Murdoch behind the account, he’s missing some good and relevant stuff.

If the person behind the account is really a new user, then they are probably wondering what all the fuss is about as two of the five accounts they are following haven’t been updated in months.

What’s your objective?

Why are you here is a good question. Have you come to listen to customers, learn from industry leaders, spruik a product, find a job, catch up with the folks or be one of the online hipsters?

All of these and any other zillion objectives are perfectly valid reasons for joining a social media service. So listening and posting in ways that help your objectives makes sense, as does following the right people.

The whole point of using social media services – be it Twitter, Facebook, LinkedIn or any of the other hundreds of online networking platforms – is to listen, learn and talk with your peers and the leaders of the areas you’re interested in. Perhaps you’ll even be considered a leader, as Rupert Murdoch certainly is.

Starting by listening and understanding how a social media service works and where it adds value for you will make using the site a far better investment of your time.

The death of the short message service

How SMS revenues are drying up

The New York Times’ Bits Section looks at how in many countries text messaging (SMS) services are declining.

For telcos, the SMS feature was a happy – and extremely profitable – accident with the Short Message Service feature designed as a control channel for the mobile voice networks.

The Short Messaging Service cost almost nothing to develop and quickly became a massive profit centre for mobile phone companies.

Today in markets where smartphones are dominating sales, people are moving many of their communications away from text messages over to Internet based services like email, instant messaging and social media.

Interestingly, in the United States text messaging still growing although at a slower rate than previously. This makes sense as the US is behind countries that have fully adopted 3G networks and subscribers don’t get the full benefit from a smartphone without a reliable and fast data service.

For developing countries, we’ll probably see SMS continue to grow as the attractions of a relatively cheap and simple communications channel like text messaging still make sense in markets where data plans are expensive and smartphones scarce.

As revenues from text messaging drops, we’ll be seeing more telecommunications companies try to replace the lost income with other services. Expect to see more offers for various business and home service bundles and offers to upgrade to the latest phones or packages as providers try to lock profitable customers into cash generating agreements.

The era of accidental profits for telcos is over, the quest for these companies now is to find how they can maintain profits in an era where data services are commoditising their lucrative product lines.

For the managers of these companies, the challenge is on to successfully do this – it remains to be seen how well they do in refocusing their businesses.